JAL loans guarantee likely not to be included in FY2009 Supplementary Budget

Japan Government reportedly has no plans to incorporate a state guarantee of up to JPY700 billion (USD7.9 billion) in loans from financial institutions to Japan Airlines into the forthcoming supplementary budget for FY2009 - a move which could seriously affect the financial prospects for the airline (The Yomiuri Shimbun/Kyodo, 12-Dec-2009). Meanwhile, Japan’s Transport Minister, Seiji Maehara, stated the Enterprise Turnaround Initiative Corp of Japan would likely make a decision on providing a broad financial package to the struggling airline in Jan-2010.

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The unprecedented aviation market growth between Asia and North America is forcing airlines to re-evaluate their core strategy and reassess who is a competitor and who could be a partner. It seems probable that Delta Air Lines and Korean Air will form a joint venture, potentially making them the second largest trans-Pacific bloc.

The next two largest airlines without a deep partnership, EVA Air and Cathay Pacific, are having to confront significant change, without the support of partners. Delta-Korean Air brings United-ANA its closest rival yet, while the American-JAL JV – already smaller – needs bulking up.

Korean Air brings Delta a wider network in Asia than ANA or JAL offer to their respective JV partners, United and American. A Korean Air-Delta JV could result in more destinations and flights being added once they are able to sell jointly.

Asia-Europe, which is one of IATA's big four international markets, has become the slowest-growing. The market underwent RPK expansion of only 1.5% in Jul-2016, the latest data available. Uncertainty in Europe and terrorism fears mean that some Asian travellers choose Australia and North America or, as IATA has flagged – travel within Asia, which has expanded by nearly double digits.

Although market expansion was slow in the first part of 2016, so too was capacity. Yet this changed in Jul-2016 as capacity increased more quickly, perhaps as airlines expected a stronger summer. Despite slow passenger growth, dynamics are highly varied – except for yield declines. The combined RPK growth of IAG (7.2%) Cathay Pacific (3.7%) and Finnair (8.7%) was not enough to offset the contraction of the largest airline in the market, AF-KLM (7.9%).

From the reported geographic data by all major airlines, load factors are falling.